Why Payment Optimization Matters for Series A Startups

You just raised Series A funding. Congrats! Now, you're focused on scaling fast and growing your team. While that's a great plan, there's one area most startups ignore, and that is payment processing costs.

Series A growth means your transaction volumes grow fast. What seemed like small fees now add up to a lot of money. While most founders focus on their next pitch deck, smart leaders understand the benefits that payment optimization offers, such as immediate savings and improved operations.

Most startups see payment processing as a utility bill. You pay your processor, customers get charged, and money moves. Simple, right? Wrong.

Your monthly statements hide complex fees that drain your revenue without you knowing. However, when you approach payments strategically with a comprehensive payment strategy, you turn this overhead into a profit driver.

Momentum Growth Partners offers business consulting services to many different types of businesses, including Series A startups. We know how financially taxing processing fees can be, which is why we can help you actively manage payments while saving you money and supporting growth.

In this blog, we will cover multiple aspects of payment optimization for Series A startups, including:

• How to correctly read your payment statements and identify costs
• Payment optimization solutions
• How to negotiate better processing rates
• How to create a payment optimization plan
• Why payment optimization matters for Series A startups

How to Read Your Payment Processing Statement

If you find yourself confused looking at your monthly payment statement, that's because it's generated like that on purpose. You may not want to look at the finer details, but it's important to dig deeper.

Here are the different types of transaction costs that your startup may be incurring:

Interchange Fees

When a customer pays via a credit card, their bank charges your bank a fee to execute the transaction. This is referred to as interchange fees. While you can't negotiate this type of cost directly, you can influence them.

Here's what affects your interchange rates:

• Card type: Debit cards cost way less than credit cards, while premium rewards cards and corporate cards are the most expensive. Many founders have no clue about the benefits of encouraging debit card payments. This strategy can help cut costs and improve their payment success rates.
• Transaction method: Swiping a card in person costs less than online transactions. Since the latter is often riskier, it costs more. If you're mostly accepting payments online, it could impact your payment operations and financial performance.
• Business code: Every business gets a code that tells banks what it sells. Entering the wrong code into the system may put you in a higher-cost category. Make sure to check yours with your payment provider.
• Level of data provided: For B2B transactions, sending extra details like invoice numbers and tax amounts (Level II and Level III data) can lower your interchange fees.
• Payment settlement time: Waiting to settle transactions may result in higher "downgrade" fees that can increase transaction failures. Make sure to process your transactions within 24 to 48 hours.

Processor Fees

Besides the interchange fees charged by the customer's bank, your processor also needs to be paid. Processor fees are where you can save big money and optimize your payment stack.

Here's what you need to know about processor fees:

• Tiered pricing hides real costs: Under a tiered pricing system, processors put transactions in "qualified," "mid-qualified," and "non-qualified" buckets. The qualified rate looks good, but most transactions end up in higher-cost buckets, which can seriously affect a business in the case of failed payments.
• Flat rates overcharge high-volume businesses: Under flat-rate processing, you pay the same rate for expensive premium cards and cheap debit cards. This costs you money and affects your payment failure recovery costs. Check out our blog on "How Flat Fee Credit Card Processing Affects Profitability" for more information on how this pricing system impacts your bottom line.
• Interchange-plus is the only transparent option: This payment system lets you see exactly what goes to the card networks and what goes to your processor. Ask for this pricing model for your preferred payment method.

Hidden Fees

In addition to interchange fees and processor fees, some processors may charge a number of hidden costs. These may include the following:

• Chargeback fees (around $25 to $50 each)
• PCI compliance fees (even if you're compliant)
• Statement fees and gateway fees
• Early termination fees that lock you in
• Foreign transaction fees on domestic cards (yes, this happens!)

We recommend creating a spreadsheet that consists of every single fee on your statement. You'll be surprised by what you find and how it impacts your startup's finances.

Payment Optimization Solutions for Series A Startups

Understanding payment costs is just the start. To achieve your business objectives, you need innovative solutions that reduce costs and increase reliability.

Here are a few payment optimization strategies that you can explore:

Use Multiple PSPs for Better Approval Rates

Don't rely on just one processor, as that approach could be risky and expensive for your business model. Here are a few reasons why you need multiple payment service providers (PSPs):

• No downtime in case one processor fails
• Better deals via negotiations
• Smart routing to block fraudulent transactions
• Less risk as you spread your transactions across different processors

Setting up multiple PSPs may sound complex, but the savings and stability make it worth the hassle. It's best to reach out to a skilled payment processing consultant for proper implementation.

Fix Your Checkout Experience for Mobile Payments

A broken checkout can adversely impact sales and even result in declined transactions. When checking out, the customer experience should be simple and fast. Here's what you should focus on:

• Improve checkout speed: Every extra second loses customers and increases integration costs, which is why focusing on checkout speed is crucial.
• Offer popular payment methods: Some customers may want to pay by card, while others may prefer digital wallet payments. Consider including Apple Pay, Google Pay, and ACH for large purchases to accommodate different consumer preferences.
• Save customer cards: Use tokenization to store sensitive data securely and handle expired cards automatically. It can save a lot of time and hassle.
• Mobile-first design: Most customers pay on their phones, so optimizing the checkout for mobile payments is important.

Go Beyond Credit Cards and Card Payments

Card payments aren't always the cheapest. You can explore the following alternatives based on your business goals:

• ACH payments: This payment method works great for recurring payments and B2B sales. It costs much less than credit cards and connects directly to a customer's bank account. While ACH payments can take longer to settle, they can save your business a lot of money.
• Digital wallets: Apple Pay and other digital wallets may have lower fees and convert better. Plus, customers trust such companies more, which helps with taking payments in e-commerce environments.
• Buy now, pay later services: Such offerings can boost sales, but cost your startup a lot of money in the long run. Use them strategically, especially when targeting specific markets.

A common mistake that many founders make is adding every payment method there is. This can be costly and difficult to manage. Go for the ones that save money or boost conversions for your specific business model and help increase sales.

Track Everything with Fraud Detection

One thing that we like to tell founders is that you can't improve what you don't measure. Make sure to ask for detailed reports from your processors to identify opportunities for improvement.

Do you have detailed reports but are unsure what to do with them? Watch out for these numbers:

• Approval rates by card type and location
• Your real processing costs over time
• Chargeback patterns and fraudulent transactions
• Interchange fees and processor markup
• Strong customer authentication success rates
• High-risk transactions and reducing fraud metrics

Many processors give you confusing reports on purpose. They don't want you to see where your money goes. It's important to know what data is crucial for your startup so that you can push back when they give you garbage.

With the right data and custom rules, you can spot issues early and fix them before they cost your business money. Although this proactive approach to reducing costs can be time-consuming, it can deliver quick results.

How to Negotiate Better Payment Processing Rates

Now that you've analyzed your costs and explored your options, it's time to negotiate with payment processors.

Negotiation isn't just about asking for lower rates. You need to leverage your business value to secure a deal that helps you grow and support your strategic initiatives.

Here's what our experts recommend to negotiate better rates:

Know Your Numbers Before You Start



Never negotiate without data, as processors are smart and will spot weaknesses. Your best defense is knowing your payment details inside out.

Start by gathering these key metrics first:

• Monthly processing volume in dollars
• Average transaction size
• Card type breakdown (credit vs debit, rewards cards)
• Current chargeback rates
• Every fee you currently pay

A key thing to remember here is that processors respect merchants who come prepared. Show them the data you have, and they'll think twice before slapping you with hidden fees.

Smart Negotiation Tactics

If you process high-volume transactions every month, you have serious bargaining power. Use it to your advantage by:

1. Demanding interchange-plus pricing: This is non-negotiable. If the processor only offers tiered or blended rates, walk away. They're trying to hide their real markup.
2. Seeking multiple quotes: Talk to at least three processors at once. Let them know they're competing for your business. This approach ensures you get the best offers.

Keep contracts short. Avoid long-term deals, as they come with heavy cancellation fees. Month-to-month agreements are great, as they give you the flexibility to change processors if the quality of service drops or you find better rates.

Make sure to read every contract clause. Pay attention to rate increases, uptime guarantees, and compliance fees. This is where processors like to be sneaky and add a few clauses that benefit them.

The payment industry is competitive, so don't be afraid to walk away. There are always other processors who are eagerly waiting to work with you. Keep this in mind when negotiating.

Look Beyond Just Rates

Don't just choose a processor based on the rate they offer. Always consider other factors, some of which may include the following:

• Customer support quality and availability
• Fraud protection tools and false positive rates
• Ease of integration
• System reliability and uptime history
• Experience in your industry

A slightly higher rate makes sense if it comes with better fraud protection that saves you money on chargebacks. Remember that your business profile determines what's a good rate for you. Don't compare yourself to low-volume retailers if you're processing millions every month.

To learn the art of negotiation with a processor, make sure to read our blog on "How to Reduce Your Payment Processing Costs," where we go over the strategies to optimize payments in a bit more detail. 

Step-by-Step Payment Optimization Plan for Series A Startups

Payment optimization isn't a one-time project. It's an ongoing process that saves money every month, helping you achieve your business goals. Here are the steps founders should follow to optimize their payment system:

Step 1: Audit Your Current Setup

Start by gathering 12 to 24 months of payment statements from every processor you use. Don't skip the small ones.

Calculate your true effective rate by dividing total fees by total volume. List every single fee on your statements. Create a spreadsheet to track everything.

Look at your transaction data to determine monthly volume, average transaction size, card types, and where customers are located. Check your chargeback and decline rates, too.

A quick audit of the statement can show exactly where your money goes and reveal hidden costs that could be eating your profits.

Step 2: Set Clear Business Goals

Vague goals deliver poor results. Be specific about your payment strategy objectives.

Set realistic targets, such as "reduce processing costs by 15% in 9 months." Pick measurable goals for approval rates and chargeback reduction.

Step 3: Research New Partners

Find reputable processors with experience in high-volume Series A startups. Request detailed proposals and insist on interchange-plus pricing from the start.

Provide the processor with transaction data so that the quotes are accurate. Make sure to compare everything, not just rates.

Step 4: Negotiate and Choose

Use competing proposals to your advantage. Go back to the providers and ask them to beat the competitors' offers. This will give you greater negotiating power.

Always pick transparency over the lowest rate. Look for interchange-plus pricing and flexible contracts with no hefty early termination fees.

Step 5: Implement Carefully

Plan your switch in detail. Test everything, including payment flows, card types, and decline scenarios, in a staging environment before going live.

For multiple processors, roll out gradually while monitoring performance.

Step 6: Keep Optimizing

Review statements monthly. Monitor approval rates and chargeback ratios. Re-evaluate providers annually, even if you're happy with them. This systematic approach can help turn payment processing from a cost center into a competitive advantage.

The payment industry changes fast. What works today might not work in 18 months. This is why many startups hire payment consultants for ongoing monitoring and re-negotiation.

Why Payment Optimization Matters for Series A Startups

Payment optimization isn't just about saving money. It provides many benefits, some of which include the following:



• Access to capital due to lower costs
• Boosts conversions through better customer checkout experiences
• Greater revenue from stronger fraud protection
• Complete transparency into your payment data
• Reduced downtime due to backup systems

Get Expert Help with Payment Optimization Today!

At Momentum Growth Partners, we help Series A startups and other businesses optimize their payment systems. We don't just give advice. Our experts analyze your specific setup, find hidden costs, and create custom strategies that save you money.

Ready to stop losing money on payment fees? Call us at (517) 730-1751 for a quick statement audit today. Our experts are ready to show you exactly where you can save and help you build a payment system that drives growth!